The introduction of EMV is supposed to help reduce instances of fraud. But when a merchant has trouble operating its terminal, unscrupulous customers can take advantage.

Benjamin Willard, who manages a bounce house business just outside of New Orleans, says that’s what happened to him recently. In December, his business got stuck with a $340 bill for a birthday party because a customer disputed a charge she made with a chip card that the terminal was unable to process through its chip reader.

About two years ago, the bounce house upgraded to an EMV-enabled terminal but has spent a lot of time troubleshooting the new chip reader and continued to swipe many of its transactions as a result. It’s happened on a few occasions that the mag stripe reader rejected chip cards, so an employee would manually key in the card information and capture the signature to handle the payment. Willard said that the practice hadn’t been a significant problem until this particular case.

Everything seemed fine at first. In October, the customer called to book the party. The business charged the customer a $100 deposit to make the reservation and had the customer sign a contract authorizing the business to charge her card.

On the day of the party in December, when the customer showed up at the checkout counter to pay off the $240 balance, the mag stripe reader rejected her card, apparently because it contained a chip. So Willard manually entered in the card number to push the payment through.

A few weeks later, the bounce house received a chargeback notification indicating that the customer disputed the entire $340 charge. Because terminal did not read the chip, the bounce house had no recourse and was liable for the charge – even though the business had surveillance footage of the customer making the payment, as well as the customer’s signed contract and receipt.

“At the end of the day, it was a customer who was trying to [defraud] us and didn’t want to pay the balance,” Willard says.

Willard’s story is consistent with findings that indicate most chargebacks are deliberate. As much as 86% of all chargebacks are due to consumer fraud, as opposed to identity theft or security breaches, according to research by the dispute mitigation firm Chargebacks911.

Friendly fraud and chargeback fraud account for 71% of merchant losses to fraud, which adds up to $4.8 billion of the $6.7 billion lost, according to 2016 research by LexisNexis and eMarketer.

Alison Burns, who handles the merchant account for the bounce house, says she is frustrated because sees erroneous chargebacks like this one all the time. Burns is president and CEO of merchant brokerage firm Precision Payment Systems in New Orleans.

“Banks automatically rule in favor of customers,” Burns says. “And customers probably know there are so many hoops for a business owner to jump through to get their money back that they’ll take a gamble.”

What was especially odd, Willard says, was that the customer didn’t dispute the $100 deposit until after the day of the party. “You’re talking about a 60-day-old transaction – no report, no calls or anything. But with the final transaction when they were in the building, they decided to call,” he says.

Last year’s fraud liability shift made it so that if a merchant does not have an EMV-capable chip card reader in place, the merchant is on the hook for any and all chargebacks and fraudulent transactions tied to EMV cards.

Customer service told the bounce house owner that he would have to contact the customer to get her to pay them back. Given that the owner works more than 100 hours a week at his primary job, he said taking the customer to small claims court over $340 wouldn’t be worth the time and effort.